Search

Starting a Business - Location Independent and No Revenues at this Point

Hello! I'm new to all of this, and my situation is a little different than
the typical scenarios I've read on websites, in books, etc.
I plan to start a service business, but I will NOT be offering up services or
collecting any sort of revenue until sometime next year. First I will be
attending conferences, workshops, and purchasing informational resources,
incurring business expenses. For that purpose, I have already obtained an EIN
as a sole proprietor doing business under my own name. I plan to use the EIN
to establish a business checking account to keep these expenses separate from
my personal finances.
Since I will not actually be collecting any revenues at this point, do I need
to register with my state/city/county? Here's the catch... I currently reside
in Nebraska, but I do not know where I will be opening the business yet (it
will most likely not be Nebraska). I hate to pay the fees and register the
business here if I will not even be doing business here at any point. Until I
find my desired location, I'm going to be rather location independent, in
fact.
Just a little lost as to what exactly is required for my situation. I have a
request for a SCORE mentor in, but wanted to get a head start on these
forums.
Thanks!

BMT | Window Shopper |
9/12/2013 - 10:10 am

It seems that you want to form a company to explore your business idea.
Nothing wrong with that as it is done all the time. However, it seems that
you also want to deduct your expenses for doing so. Nothing wrong with that -
it is done all the time.

The IRS allows for certain pre-business costs - like you outline here - to be
deducted - you would have to research the IRS's website to determine what
costs and over what time frame they allow. Do know that you can only deduct
your business start up costs and not any personal expenses.

Now, some states also will allow this or follow the IRS's lead. But, that
depends on the state. So, you either have to pick a state now and research
their requirements or take a chance that the state you do choose will comply
with your needs.

If you know the state you want - then look for a pass through entity so that
those business expenses will also pass down to you personally since you do
not have business revenue to offset those expenses.

JGabriel | Community Moderator |
9/11/2013 - 1:51 pm

BizResearcher | Window Shopper |
9/11/2013 - 11:02 am

An attorney can provide legal advice on what you should do. However, if you
are operating as a DBA and using your full name in the business name, you may
not need to do anything else at this point. Just be certain to keep accurate
records. When you file your taxes and immediately report a loss and no income
at all, you will raise all kinds of red flags with the IRS and probably
trigger an audit. They will question whether you are a business or just
trying to avoid paying taxes.

If the cost isn't much, you may want to register the DBA with your state to
provide a bit more legitimacy. You can also print a few business cards to
hand out. Perhaps you can pick up some part-time work to bring in some
income. That is also one way to test your business concept. Once you decide
where you will live, it is easy to cancel the Nebraska DBA and register a new
one where you will be living.